Canada's budget deficit to hit largest shortfall since the Second World War

Reuters reports that Canada's budget deficit is now forecast to hit C$343.2 billion ($253.4 billion), the largest shortfall since the Second World War, amid record emergency aid spending in response to the COVID-19 pandemic, Canada's finance department said Wednesday.

The forecast is far higher than the C$28.1 billion that Canada's ruling Liberals had projected back in December 2019, before much of the Canadian economy was temporarily shut down to curb the spread of the novel coronavirus.

''This pandemic is not over,' said Finance Minister Bill Morneau said in a speech to parliamentarians that did not mention a return to balance.

'With a crisis of this magnitude, someone was going to have to shoulder the costs and the federal government was uniquely placed to take this responsibility on.'

Ket notes

• Canada has provided more than C$212 billion in direct COVID-19 support.
• Canada has provided nearly 14% of gross domestic product in total support.
• Budgetary revenues set to plunge by levels not seen since the Great Depression.
• Budgetary revenues to fall twice as much as in the aftermath of the 2008 global financial crisis.
• The federal debt-to-GDP ratio is now forecast to hit 49.1% in 2020-21, from 30.9% forecast seen in December 2019.

USD/CAD update

• USD/CAD Price Analysis: The pair is about to test the key support zone of 1.3485